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Pre-school nurseries targeted by venture capitalists

With two wages necessary for running a household, childcare is essential to allow the parents to be workers by day and parents by night. Under capitalism, this means big bucks are there for the taking.

Full-time nursery for children under the age of two now costs almost two-thirds of a parent’s weekly take-home pay in England. Parents in Scotland fare slightly better, paying half (51%) of one salary for childcare, while in Wales the figure is 63%[i].

Capitalist Britain see’s the provision of childcare as just one more way of making money.

Childcare costs are anti-family

In Blackpool, with an average weekly take-home pay of £344, a full-time nursery place costs £238 a week or 69% of a parent’s weekly take-home pay. In Newport, Wales, the weekly pay is £396 and nursery costs £247 or 62% of the wage packet.

Analysis suggests mothers are falling into debt to cover the cost of childcare, with one in 10 who responded to a survey on the website saying they are in £20,000 or more worth of debt, while 49% were in debt of some kind (excluding their mortgage).[ii]

Clearly, failing to step in and address the impact that private provision is having upon working-class families demonstrates that the present government, like those before it, is anti-family, anti-marriage (since it places an awful financial burden upon the parents) and anti-children.

The Workers Party wants to see tax incentives and state support for families, at least as good as that available in Europe and under a socialist Britain, it would be markedly better. As Point 4 of our Ten Point Programme states, the Workers Party is committed to high-quality, free childcare for pre-school children. This is not a statement we take lightly, nor is it unreasonable. The money being poured into the war in Ukraine should all be spent on supporting our families, the young and the elderly.

How has such an awful state of affairs has arisen?

Firstly, since two wages have become essential to keeping a roof over the head, and secondly, since the capitalist state takes no interest in providing for families (and see’s the market as the solution for all life’s troubles) working people have been forced to rely on private providers of childcare. These providers, under the capitalist system have to operate on a profit. The bigger the profit, the more likely you are to survive, eat up your rivals (acquisitions) and keep the money coming in. Since nurseries are a good way of keeping the cash flowing, they are increasingly seen as an acquisition that can help vulture capitalists service their debts. How?

Well Busy Bees nursery group has been passed between private equity and corporate owners for more than two decades. Now owned by the private equity arm of Ontario Teachers’ Pension Plan, its debt is about 7.5 times its earnings.[iii] 

Busy Bees said its leverage was 4.1 times earnings. The debts left the group, whose core earnings in 2021 were £178mn, with a £29mn bill for interest repayments on bank loans and overdrafts. Easily repayable, even with other running costs taken into account.

In the last five years there has been an uptick in acquisitions in the nursery sector, according to Christie & Co, a brokerage firm, there was a 50 per cent increase in nursery businesses sold in the first half of this year. The largest chains (Bright Horizons and Busy Bees) have expanded to more than 300 nurseries apiece, becoming the country’s largest providers.[iv]

According to a report this week in the Financial Times,

“…growth comes in the midst of a childcare crisis. Slim government subsidies have left an unplanned market of providers struggling to stay afloat, staff wages low, and parents facing some of the highest childcare fees in Europe. Yet large for-profit groups and private equity backers have spied an opportunity, increasing acquisitions and growing their share of a sector traditionally dominated by smaller chains. Investors say this will bring more cash, innovation and efficiency. But some owners, parents and staff fear putting international, often highly leveraged companies in charge of childcare will increase costs, damage quality and close providers in deprived areas, while leaving nurseries in a precarious financial position.”

Sam Freedman, a former adviser to the Department for Education is reported as fearing expanded private ownership will divert funding to profit and debt servicing.

“We’re putting a lot of state money into the sector and they’re taking a lot of money out,”. So it’s the old story of the transfer of public money into private hands. Just as with the HMO scandal in housing, the public purse is emptied not to provide stable state or socially-owned services ran in the public interest, but rather the coins are emptied out of the public purse straight into the hands of the vultures and carpet baggers in the interests of private finance.

Never has the truth been clearer. The market has failed to provide the essential things which British workers need. In fact the essential things British workers need are all the things they already make or the services they supply to those who can afford them.

Capitalist Britain, under Labour or Tory government has resulted in failing provision for childcare, housing, health, education, energy, food, transport and the list could probably go on and on. In the final analysis, socialism has to be the answer; widespread social ownership of pre-school childcare provision. But whilst that’s easy to say, it’s harder to put into practice, and without a plan for putting it into effect those who state the obvious are not really serious about the case they’re making.

To build the case for socialism the labour movement and working class has to articulate its demands. Demands to make limited change are by their very nature limited, reforming and subject to reversal. But reforms, palliatives and limited change, just like strikes for better pay, are the incremental skirmishes waged on the larger battlefield. The Workers Party is interested to hear your views. The development and support for co-operative models of nursery provision, actions to limit and push back against the growth of monopoly interests, the unionisation of nursery workers, tax relief and government policy aimed at supporting families and working parents. Let us know your thoughts in the comments.

[i] Analysis by Business in the Community (BITC)

[ii] Guardian: Nursery for under-twos costs parents in England 65% of wage

[iii] FT: Private equity forms spot profit in UK’s nurseries

[iv] FT: Private equity forms spot profit in UK’s nurseries

One thought on “Pre-school nurseries targeted by venture capitalists

  1. This is an excellent and well-researched article on a very important topic. I agree with the diagnosis and the possible remedies mentioned at the end of the article.
    One point that I’d like to add though, if socialist policy is to be family friendly as you suggest and I support, then working families should have the opportunity, if they so wish, of opting out of the workplace for the first three or four years of a child’s life. Money spent on nursery care should then go to the father or mother who chooses to be carer as a temporary ‘basic income’ (an idea I do not support in general) while the parent gives their child care for the first years of life. Such provision could also be combined with an entitlement to some vocational education for up or reskilling to get back into the workforce when the time is right.
    Who knows? Once could think of paying family carers for care for unwell relatives or the frail elderly as well. This is meaningful work and something that many relatives would wish to do. As with childcare it can be accompanied by back to work provision when the time is right. If it damages the GDP figures then so what?

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